This is extremely good news, but it's also extremely frustrating because it took them so long to finally do what they should have done decades ago. This excerpt from the article illustrates that...
This is extremely good news, but it's also extremely frustrating because it took them so long to finally do what they should have done decades ago. This excerpt from the article illustrates that frustration fairly well:
After previous leaders allowed its equipment to fall into disrepair in a apparent attempt to boost profits and management bonuses, the utility's grid was blamed for igniting a series of devastating wildfires in 2017 and 2018 that prompted the company to file for bankruptcy in 2019. The biggest fire, in Butte County, wiped out the entire town of Paradise and resulted in PG&E pleading guilty to 84 felony counts of involuntary manslaughter last year just weeks before it emerged from one of the most complex cases in U.S. history.
I was flippant in my initial reply, but functionally, PG&E has a deferred maintenance issue. They may get away with rate increases, but that's unlikely given their oversight by the CPUC. More...
I was flippant in my initial reply, but functionally, PG&E has a deferred maintenance issue. They may get away with rate increases, but that's unlikely given their oversight by the CPUC. More likely are bonds or other funding mechanisms given the volume of money needed.
Bonds are a way to defer funding but they aren’t really a source of funding unless they aren’t paid back. (Like if PG&E went bankrupt again.) Stockholders are a source of initial funding and could...
Bonds are a way to defer funding but they aren’t really a source of funding unless they aren’t paid back. (Like if PG&E went bankrupt again.) Stockholders are a source of initial funding and could lose everything if the company fails (that’s the risk they take and are paid for) but taking money from investors while planning on failing is basically fraud.
So if the company doesn’t fail then all the money eventually comes from ratepayers. Or the government, I suppose.
Not at all. They could also issue more stock to sell. That'd be a direct hit to their investors, but not at the cost of rate increases. Suffice it to say, there's other choices that could be made...
Not at all. They could also issue more stock to sell. That'd be a direct hit to their investors, but not at the cost of rate increases. Suffice it to say, there's other choices that could be made other than rate increases.
Yes, selling stock is a way to raise funds, and there’s no guarantee the stockholders will get anything back. But selling the stock with the plan of simply spending it, with no claim on future...
Yes, selling stock is a way to raise funds, and there’s no guarantee the stockholders will get anything back. But selling the stock with the plan of simply spending it, with no claim on future earnings, is securities fraud. For example, fraudsters might set up a dummy corporation, raise money, and extract the money using legitimate-sounding “business expenses.”
So if you’re advocating that shareholders pay the $15-30 billion to bury lines, and not ratepayers (eventually), that amounts to saying that PG&E should be run as if it were a scam and not a legitimate business. (Or maybe as a charity if you do it openly.)
Though, the line between a legitimate business that happens to fail and a fraudulent business that fails on purpose can be pretty thin sometimes and basically comes down to management’s intent.
Selling stock to acquire funds for operation or infrastructure investment isn't fraud, that's been done repeatedly by companies in a pinch. AMC did it, GameStop did it, plenty others did it. I'm a...
Selling stock to acquire funds for operation or infrastructure investment isn't fraud, that's been done repeatedly by companies in a pinch. AMC did it, GameStop did it, plenty others did it. I'm a bit baffled by your claim here, as it's just untrue and you're normally quite sharp.
Edit: If you specifically sold a class of stock that had no claim on future earnings, even then that wouldn't be fraud, as it would be clearly laid out in the offering. It probably wouldn't sell that well, but people did buy Hertz stock even as it was clearly heading to bankruptcy. However, that wasn't what I was suggesting in the first place.
So sure, the usual way to avoid claims of security fraud is to disclose all the risks. You can see the opposite of that in the securities fraud claims that Matt Levine writes about sometimes. He...
So sure, the usual way to avoid claims of security fraud is to disclose all the risks. You can see the opposite of that in the securities fraud claims that Matt Levine writes about sometimes. He exaggerates slightly, but if (1) something bad happens and (2) the company didn’t disclose it and (3) the stock drops, often there will be an attempt at a class-action suit.
I guess PG&E could disclose the risks and then it wouldn’t be fraud.
But the question is what kind of business model PG&E has if it just raises funds, builds expensive infrastructure, and doesn’t even try to earn a profit somehow. Why would anyone buy the stock? Is PG&E supposed to be a meme stock?
For a normal electricity utility, all the revenue comes from rate payers, the company pays expenses out of that, then there is supposed be something left to pay dividends. They are regulated so the profits can’t be too high. Financing (both debt and equity) is a way of paying things up front that the rate payers eventually pay for over time. The equity is also a buffer so that if something bad happens there is money to pay for it.
So my point is that “rate payers pay for everything, eventually” is perfectly normal. I guess there are variations but I’m wondering what sort of business it’s supposed to be if that’s not enough revenue and it’s guaranteed to lose money.
You're talking like they'll never make a profit again, whereas I'd argue that they'd be in a better long term position if they weren't repeatedly liable for damages due to neglected...
You're talking like they'll never make a profit again, whereas I'd argue that they'd be in a better long term position if they weren't repeatedly liable for damages due to neglected infrastructure.
Separately, they're heavily regulated w.r.t. rate increases, and the CPUC has historically been dubious about it.
If they eventually make a profit, that means that eventually, they got enough revenue from customers to pay for the infrastructure. So the question is how long it will take to pay off and whether...
If they eventually make a profit, that means that eventually, they got enough revenue from customers to pay for the infrastructure.
So the question is how long it will take to pay off and whether it can be done without rate increases. To answer that, we'd have to look at the numbers.
This is extremely good news, but it's also extremely frustrating because it took them so long to finally do what they should have done decades ago. This excerpt from the article illustrates that frustration fairly well:
Ah yes,
governmentcapitalism working as intended.About time I get some solar panels.
Ideally, where should the money come from?
Ideally, large climate change prevention and ruggedization funding programs from the federal (or possibly state) government.
The shareholder premiums they paid out over the last decade?
Maybe, but how much does it add up to? It might be interesting to figure out how much money shareholders put into PG&E versus how much they got out.
I was flippant in my initial reply, but functionally, PG&E has a deferred maintenance issue. They may get away with rate increases, but that's unlikely given their oversight by the CPUC. More likely are bonds or other funding mechanisms given the volume of money needed.
Bonds are a way to defer funding but they aren’t really a source of funding unless they aren’t paid back. (Like if PG&E went bankrupt again.) Stockholders are a source of initial funding and could lose everything if the company fails (that’s the risk they take and are paid for) but taking money from investors while planning on failing is basically fraud.
So if the company doesn’t fail then all the money eventually comes from ratepayers. Or the government, I suppose.
Not at all. They could also issue more stock to sell. That'd be a direct hit to their investors, but not at the cost of rate increases. Suffice it to say, there's other choices that could be made other than rate increases.
Yes, selling stock is a way to raise funds, and there’s no guarantee the stockholders will get anything back. But selling the stock with the plan of simply spending it, with no claim on future earnings, is securities fraud. For example, fraudsters might set up a dummy corporation, raise money, and extract the money using legitimate-sounding “business expenses.”
So if you’re advocating that shareholders pay the $15-30 billion to bury lines, and not ratepayers (eventually), that amounts to saying that PG&E should be run as if it were a scam and not a legitimate business. (Or maybe as a charity if you do it openly.)
Though, the line between a legitimate business that happens to fail and a fraudulent business that fails on purpose can be pretty thin sometimes and basically comes down to management’s intent.
Selling stock to acquire funds for operation or infrastructure investment isn't fraud, that's been done repeatedly by companies in a pinch. AMC did it, GameStop did it, plenty others did it. I'm a bit baffled by your claim here, as it's just untrue and you're normally quite sharp.
Edit: If you specifically sold a class of stock that had no claim on future earnings, even then that wouldn't be fraud, as it would be clearly laid out in the offering. It probably wouldn't sell that well, but people did buy Hertz stock even as it was clearly heading to bankruptcy. However, that wasn't what I was suggesting in the first place.
So sure, the usual way to avoid claims of security fraud is to disclose all the risks. You can see the opposite of that in the securities fraud claims that Matt Levine writes about sometimes. He exaggerates slightly, but if (1) something bad happens and (2) the company didn’t disclose it and (3) the stock drops, often there will be an attempt at a class-action suit.
I guess PG&E could disclose the risks and then it wouldn’t be fraud.
But the question is what kind of business model PG&E has if it just raises funds, builds expensive infrastructure, and doesn’t even try to earn a profit somehow. Why would anyone buy the stock? Is PG&E supposed to be a meme stock?
For a normal electricity utility, all the revenue comes from rate payers, the company pays expenses out of that, then there is supposed be something left to pay dividends. They are regulated so the profits can’t be too high. Financing (both debt and equity) is a way of paying things up front that the rate payers eventually pay for over time. The equity is also a buffer so that if something bad happens there is money to pay for it.
So my point is that “rate payers pay for everything, eventually” is perfectly normal. I guess there are variations but I’m wondering what sort of business it’s supposed to be if that’s not enough revenue and it’s guaranteed to lose money.
You're talking like they'll never make a profit again, whereas I'd argue that they'd be in a better long term position if they weren't repeatedly liable for damages due to neglected infrastructure.
Separately, they're heavily regulated w.r.t. rate increases, and the CPUC has historically been dubious about it.
If they eventually make a profit, that means that eventually, they got enough revenue from customers to pay for the infrastructure.
So the question is how long it will take to pay off and whether it can be done without rate increases. To answer that, we'd have to look at the numbers.